Technical topics regarding tax preparation.
Step up in Basis for Partnership
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14-Jun-2019 9:06am

taxpayer and spouse are equal owners in rental property partnership LLC
member shares held in a revocable trust
taxpayer dies during the year,,, wife inherits through the revocable trust.. it remains in the revocable trust and it remains a disregarded entity for tax purposes

no longer a partnership LLC (now a one member- spouse) and must be reported on personal schedule E, form 1040 for the after death period... and a short year partnership year from 1/1/18-date of death. Then it all gets reported on spouses schedule E.


Spouse should get a step up in basis......We are assuming that step up ends up in her depreciable basis on the rental property on her Sch E.

17-Jun-2019 1:13pm

Yes to step up. Yes to depreciable. Makes sure to separate step up in land (non-depreciable), and step up in Building(depreciable). You will want client to get support for the stepped up value (appraisal, etc), and remember the step up is only for 50% of the property, and not 100%.

17-Jun-2019 1:37pm

the partnership is an LLC.... is the 1/2 step up in basis the surviving spouse's basis in the LLC itself = outside basis
or the underlying asset, depreciable building, which will now be reported as a sole member LLC rental on 1040, Schedule E?

17-Jun-2019 1:42pm

is the 1/2 step up in basis to the surviving spouse at the LLC level = outside basis
or to the underlying rental real estate itself which will now be reported as a sole member LLC on form 1040, Schedule E..
with new 40 year life and no accumulated depreciation?

20-Jun-2019 11:46am

It would be on the Schedule E as a depreciable asset with the other rental property items.
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